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Power of Attorney: 101

The power of attorney, sometimes abbreviated POA, is an essential document to any estate plan. The purpose of the document is to grant an individual, the agent or attorney-in-fact, the power to act on your, the principal’s, behalf. In effect, a POA places the agent in the principal’s shoes, for the limited purposes outlined in the POA document. It is important to understand that there are two types of POA and that both are essential for a complete estate plan.

Types of POA

The two types of POA are (i) a POA that handles financial matters, known as a POA and (ii) a health care POA, also sometimes referred to as a health care directive.

POA (financial)

As mentioned above, the POA allows an agent to handle financial matters for the principal. The matters that the agent can handle are outlined in the POA document and can include, signing checks, selling property, and many other financial matters.

Durable, Limited and General

There are several terms that you will hear mentioned when dealing with the POA. Theses terms are durable, limited and general.

Durable means that the POA does not terminate upon the incapacity of the principal. In plain English, if for whatever reason, you, the principal, are incapacitated, such as by a comma, then the POA remains in effect and the agent can still act on your behalf.

Limited and general are mutually exclusive terms; a POA can either be limited or general, it cannot be both. If a POA is limited, which will usually be indicate in the title of the document, then the agent’s powers are limited (I know, somewhat obvious after you hear the explanation). If a POA is general, which will usually also be indicated in the title of the document, then the agent’s powers are much broader. Whether a POA is limited or general will usually be indicated in the title (for example, “Limited POA” or “General POA”).

Attorneys generally avoid the general POA, because it grants too many powers to the agent.

Health Care POA (HPOA)

A HPOA is a power of attorney that grants the agent powers over medical decisions for the principal. The powers can include whether to resuscitate the principal and whether to give pain medication.

Unlike the POA, a HPOA is almost always durable, because the only time you need someone to make medical decisions on your behalf is if you are incapable of making those decisions. However, I have known principals who granted their agent a HPOA that worked even when the principal was capable of making decisions for themselves, because they trusted the agent and just didn’t have the time, patience, etcetera to deal with doctors.

Lastly, a HPOA can also be used to specify burial instructions, organ donation, and other such medical issues.

Wrap-Up

Both POAs are important pieces of an estate plan, because they play central roles in the overall outline of an estate plan. An estate plan is a plan for when an individual is no longer capable of handling their own affairs; the trust document and will handle the distribution of assets, while the POAs are guides for an agent, when the principal is no longer capable of acting on their own behalf.

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Information on this site was believed to be correct at the time of posting. Also, readers should be careful about relying on any information found online. Please consult a lawyer to ensure accurate compliance of the law within your jurisdiction.